Microcephaly is a neurodevelopmental disorder causing significantly reduced cerebral cortex size. Many known microcephaly gene products localize to centrosomes, regulating cell fate and proliferation. Here, we identify and characterize a nuclear zinc finger protein, ZNF335/NIF-1, as a causative gene for severe microcephaly, small somatic size, and neonatal death. Znf335-null mice are embryonically lethal and conditional knockout leads to severely reduced cortical size. RNA-interference and postmortem human studies show that Znf335 is essential for neural progenitor self-renewal, neurogenesis, and neuronal differentiation. ZNF335 is a component of a vertebrate-specific, trithorax H3K4-methylation complex, directly regulating REST/NRSF, a master regulator of neural gene expression and cell fate, as well as other essential neural-specific genes. Our results reveal ZNF335 as an essential link between H3K4 complexes and REST/NRSF, and provide the first direct genetic evidence that this pathway regulates human neurogenesis and neuronal differentiation.